Hedge funds have significantly increased bearish positions on the Australian dollar, capitalising on the currency’s vulnerability as concerns over US tariffs and a sluggish Chinese economy weigh heavily on its value, according to a report by Bloomberg.
Data from the Commodity Futures Trading Commission for the week ending 31 December reveals that leveraged funds have boosted short positions on the Aussie to their highest levels since March 2022. Analysts suggest there could be further room for these bearish bets, given the currency’s sensitivity to shifts in risk sentiment.
“The Aussie continues to serve as the Group-of-10 ‘whipping boy’ for any adverse developments in non-US economic growth,” said Ray Attrill, Head of Foreign-Exchange Strategy at National Australia Bank. “The December build-up of speculative shorts aligns perfectly with the poor price action the Aussie experienced throughout the month.”
Over the past three months, the Australian dollar has depreciated more than 7% against the US dollar and underperformed every Group-of-10 currency except the New Zealand dollar. A slowdown in China—Australia’s largest trading partner—has further dampened the outlook for the Aussie, prompting traders to offload the growth-linked asset.
In Asian trading on Tuesday, the Australian dollar edged up 0.1% to 62.49 US cents.
